How much of a difference can better search tools make for an e-commerce site? Wal-Mart is betting on a 10% -15% improvement in sales following the launch of its new Polaris search engine on Walmart.com, developed by its @WalmartLabs division.
Location, Location, Location
In the business of retail, it's all about location, That's true for which aisle in the grocery store you display the milk, and its even true for ecommerce sites, which rely on product placement on pages and better search tools to make the difference between a sale and no sale.
The new semantic search engine is based on technology from a number of @WalmartLabs acquisitions, including social media startup Kosmix, which was acquired by Wal-Mart in April 2011. Kosmix' Semantic Web platform, called the Social Genome, organized social media data with algorithms that score social media content and help deliver results for shoppers that are more in line with what the customer wants.
This varies from the usual method of determining a customer's potential likes and dislikes: mining transaction data. For example, if you buy a pink flamingo from the home and garden division, then you might be tagged as someone who likes kitschy lawn decorations.
That's all well and good, unless you were buying that lawn ornament as a gag gift for your neighbor down the street. Retailers that are mining your transaction data will send you the coupons for garden gnomes, not your neighbor.
The idea behind semantic search is that by expanding a search engine's knowledge to include social media content, the search engine can better determine the context of what you're looking for. This form of social discovery, coupled with better query parsing and synonym mining, should deliver a more tightly focused set of results to a customer.
Are Semantics Enough?
Looking at Walmart.com in isolation, it's a no-brainer that a more efficient search engine that can deliver a wider range of choices around a simple search term will up the odds of completing a sale.
The key here is how Polaris works with global Internet search. If consumers are running their searches for goods from search engines like Google or Bing, or using comparison sites like BizRate or PriceGrabber to get started, it is not yet clear how well the new Polaris technology will interact with Internet-based queries. If the semantic search advantage is lost, then Wal-Mart's Polaris advantage will be moot, and the company will have to compete not on search results but on price, availability and delivery - just like everyone else.
Availability and delivery are advantages that Wal-Mart has been able to hold against Amazon, even through the odd price wars that occastionally break out over certain hot items. Some shoppers seem to be willing to pay a little more if they know they can go down to the store today and pick up an item they've ordered online.
But Amazon is starting to explore same-day delivery, a move that should challenge Wal-Mart's edge in local availability.
Price as the Ultimate Decider
Wal-Mart's focus on improving its edge in ecommerce could be seen as sandbagging before the coming Amazon flood. Because once Wal-Mart and Amazon share a more level playing field on availability (at least in the U.S.), price becomes a bigger comparison point for shoppers again.
This could be a problem for Wal-Mart, which has 2.2 million employees to keep paid versus Amazon's 69,100, not to mention the upkeep of Wal-Mart's store locations. With less overhead, Amazon could be more nimble than Wal-Mart in selling goods for lower prices over the long-term.
That's likely one reason why Wal-Mart is taking a strong position in semantic searches and getting more integrated with social media content - to get more customers to land on Walmart.com and finish their business there.
Location is still one of the best drivers for sales, and as Amazon moves into the neighborhood (literally), Wal-Mart has continue jockeying for a better location on search results.